The Van Trump Report

Record Farm Production Expenses Will Be Somewhat Slow to Come Down

It is no secret that farm production expenses are at nosebleed levels and a new report from the United States Department of Agriculture (USDA) puts some hard numbers to this cold truth. In its annual “Farm Production Expenditures” report, the USDA’s National Agricultural Statistics Service (NASS) found that production costs in 2022 climbed to an estimated $452.7 billion, up +15.2% from $392.9 billion in 2021. Expenses were up across all 17 categories tracked, though costs rose more for livestock than crop production.

Livestock producers in 2022 were subject to an +18.5% increase in feed costs, the biggest driver of last year’s increased expenditures. That was followed by farm services (+10.8%), livestock, poultry, and related expenses (+10.1%), and labor (+9.2%). Total fuel expenses came to $17.4 billion. Expenditures for diesel, the largest fuel category by far, rose +35.4% in 2022, while gasoline costs were up +22%. On a per-farm basis, total expenditures in 2022 averaged $226,986, up +15.8% from $196,087 in 2021.

Crop expenditures in 2022 were up +12.6% to $233.8 billion, driven by fertilizer, lime, and soil conditioners at $31.9 billion, up +26% from 2021, labor at $29.0 billion (+14%), farm services at $28.6 billion (+5.9%). Rents, the fifth-largest expenditure, totaled $26.7 billion, marking a modest -2.2% decline.

Farmers aren’t expected to see much relief in 2023 or 2024. In fact, production costs are estimated to reach an all-time high of $460 billion in 2023, based on USDA projections released in June. Unfortunately, USDA’s first 2024 cost-of-production forecast projects that input costs are also expected to remain elevated into the next growing season.

The cost to produce one acre of corn is projected at $888.23 per acre in 2023 and $856 in 2024, versus $910.53 in 2022. For soybeans, the cost of production is projected to rise to $621.47 per acre in 2023, up from $620.89 in 2022, before dropping to $613 per acre in 2024. Among the major field crops, the wheat cost-of-production is forecast to be the lowest at $425.44 per acre in 2023 and $416 per acre in 2024, compared to $430.86 in 2022.

Based on USDA’s current input cost projections, trend yields, and commodity price trends, several major field crops may experience marketing year average prices below breakeven levels this year and possibly into 2024. (Sources: USDA ERS, NASS, Senate Ag Committee)

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